2020 FEDERAL BUDGET REPORT SUMMARY

Back

2020 FEDERAL BUDGET REPORT SUMMARY

On Tuesday, 6 October 2020, Treasurer Josh Frydenberg handed down the 2020-21 Federal Budget. Below we list the key tax changes.

PERSONAL TAXATION

Personal tax cuts (Stage 2) brought forward to 1 July 2020

The Government announced that it will bring forward to 1 July 2020 the personal tax cuts (Stage 2) that were previously legislated in 2018 to commence from 1 July 2022. The Stage 3 tax changes remain unchanged and commence from 1 July 2024.

From 1 July 2020, 

  • the top threshold of the 19% personal income tax bracket will increase from $37,000 to $45,000; 
  • the top threshold of the 32.5% tax bracket will increase from $90,000 to $120,000.

RATES AND THRESHOLD TABLES

Tax rates and income thresholds

Rate 2019-20 2020-21 (new) From 1.7.2024 (unchanged)
Nil $0 - $18,200            $0 - $18,200 $0 - $18,200
19% $18,201 - $37,000 $18,201 - $45,000 $18,201 - $45,000
30% - - $45,001 - $200,000
32.5% $37,001 - $90,000 $45,001 - $120,000 N/A
37% $90,001 - $180,000 $120,001 - $180,000 N/A
45% $180,001 + $180,001 + $200,001 +

 Low income offsets

The Government will bring forward the increase to the LITO to $700. it will also retain the LMITO up to a maximum of $1,080 for the 2021 year.

BUSINESS TAXATION

Immediate deduction of capital assets

  • Businesses with aggregated annual turnover of less than $5 billion will be able to deduct the full cost of eligible capital assets acquired from 7:30pm AEDT on 6 October 2020 and first used or installed by 30 June 2022.
  • For businesses (with aggregated annual turnover of less than $50 million), full expensing will also apply to second-hand assets.
  • Businesses with aggregated annual turnover between $50 million and $500 million can still deduct the full cost of eligible second-hand assets costing less than $150,000 that are purchased by 31 December 2020 and first used or installed by 30 June 2021.
  • Small businesses (with aggregated annual turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies.

Loss carry-back for companies

The Government will allow eligible companies (turnover less than $5 billion)to carry back tax losses from the 2019-20, 2020-21 or 2021-22 income years to offset previously taxed profits in 2018-19 or later income years.

The tax refund will be limited by requiring that the amount carried back to not exceed the earlier taxed profits and to not generate a franking account deficit.

Expanding Access to Small Business Tax Concessions

The Government announced that a range of tax concessions currently available to small businesses (aggregated annual turnover under $10 million) will be made available to medium sized businesses, ie businesses with an aggregated annual turnover of $10 million or more but less than $50 million.

  • From 1 July 2020, eligible businesses will be able to immediately deduct certain start-up expenses and certain prepaid expenditure
  • From 1 April 2021, eligible businesses will be exempt from the 47% FBT on car parking and multiple work-related portable electronic devices, such as phones or laptops, provided to employees
  • From 1 July 2021:
  • eligible businesses will be able to access the simplified trading stock rules, remit PAYG instalments based on GDP adjusted notional tax, and settle excise duty and excise-equivalent customs duty monthly
  • The time limit for the ATO to amend income tax assessments will be reduced from 4 to 2 years for eligible business
  • A simplified accounting method for GST purposes

Jobmaker Hiring Credit

The JobMaker Hiring Credit will be available to eligible employers over 12 months from 7 October 2020 for each additional new job they create for an eligible employee.

Eligible employers will receive $200 per week if they hire an eligible employee aged 16 to 29 years or $100 per week if they hire an eligible employee aged 30 to 35 years. The credit will be available for up to 12 months from the date of employment of the eligible employee with a maximum amount of $10,400 per additional new position created.

The employee will need to have worked for a minimum of 20 hours per week, and received the JobSeeker Payment, Youth Allowance Parenting Payment for at least one month out of the three months prior to when they are hired.

Important: Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. Client Alert is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.


Insight Categories

Looking for some Insight?

Sign up to receive tips & traps, market updates and more.
Submit
I would like to say that Loewy Consulting Partners provide prompt and helpful advice in processing my income tax and in dealing with the Australian taxation office and highly recommend their services to my colleagues. The staff are friendly and always available to assist with knowledgeable advice.

Dr Robert Mansberg
MB BS FRACP, Consultant Physician in Nuclear Medicine, Concord and Nepean Hospitals, Clinical Lecturer, Discipline of Imaging, University of Sydney